Milk Prices, Costs of Nutrients, Margins and Comparison of Feedstuffs Prices

Alex Tebbe, Graduate Research Associate, Department of Animal Sciences, The Ohio State University

Milk Prices

In the last issue, the Class III component price for May and June closed at $15.57 and $16.44/cwt, respectively. For the month of July, the Class III future was projected to stay stagnant at $16.58 and then decrease over a $1/cwt to $15.29/cwt in August. The Class III component price for the month of July actually closed at about $1/cwt lower than its future at $15.45/cwt, whereas the August Class III component price closed more than $1/cwt higher than its future price at $16.57/cwt. Class III futures for September and October are expected to remain relatively unchanged from the August Class III component price at $16.59 and $16.44/cwt, respectively.

Nutrient Prices

As in previous issues, these feed ingredients were appraised using the software program SESAME™ developed by Dr. St-Pierre at The Ohio State University to price the important nutrients in dairy rations, to estimate break-even prices of many commodities traded in Ohio, and to identify feedstuffs that currently are significantly underpriced as of September 25, 2017. Price estimates of net energy lactation (NEL, $/Mcal), metabolizable protein (MP, $/lb; MP is the sum of the digestible microbial protein and digestible rumen-undegradable protein of a feed), non-effective NDF (ne-NDF, $/lb), and effective NDF (e-NDF, $/lb) are reported in Table 1.

In this issue, I have also calculated a new corn silage price for the 2017 growing year: $43.20/ton (35% dry matter). This price is nearly identical to the 2016 growing year ($42.50/ton) and is still a bargain compared to other common ingredients. The price I calculated is based on the crop value as if it was harvested for corn grain rather than silage. Because corn silage is dual purpose and provides marked amounts of both NEL and e-NDF for dairy cows, the true value of corn silage to the producer should actually be around $65.40/ton, about 40% higher than my calculation. However, corn silage quality varies considerably based on location (e.g., weather and growing conditions), harvesting and storage conditions, or management practices, as well as the corn hybrid planted. Using the 75% confidence intervals defined in Table 2 are better predictors of what corn silage may actual be worth to producers because of this real world variability. The intervals still do not contain the calculated value based off corn grain (i.e., the $43.20/ton estimate). Bottom line, corn silage should be a no brainer for making up the majority of the forage component for rations during the upcoming year, but only if you have stored enough – running out of corn silage in August will be a huge financial burden.

Nutrient prices continue to remain relatively low as they have been for the past three years. For MP, its current value ($0.42/lb) has increased slightly from July’s issue ($0.37/lb) but is about 13% lower than the 5 year average ($0.48/lb). The cost of NEL is 7¢/Mcal, slightly lower than the July price at 9¢/Mcal and is lower than the 5-year average of 11¢/Mcal. The price of e-NDF at 7¢/lb is slightly lower than the July price (5¢/lb) and ne-NDF at -7¢/lb (i.e., feeds with a significant content of non-effective NDF are priced at a discount) is identical to the July price.

To estimate the cost of production at these nutrient prices, I used the Cow-Jones Index for cows milking 70 lb/day or 85 lb/day at 3.7% fat and 3.1% protein. In the last issue, the average income over nutrient costs (IONC) was estimated to be $10.40/cwt for cows milking 70 lb/day and $10.78/cwt for cows milking 85 lb/day. For September, the IONC for our 70 lb/day and 85 lb/day cows are slightly higher than July at an estimated $10.68/cwt and $11.06/cwt, respectively. These IONC may be overestimated because they do not account for the cost of replacements or dry cows; however, they should be profitable when greater than about $9/cwt. Overall, farmers producing milk in Ohio should be making money.

Table 1. Prices of dairy nutrients for Ohio dairy farms, September 25, 2017.

Economic Value of Feeds

Results of the Sesame analysis for central Ohio on September 25, 2017 are presented in Table 2. Detailed results for all 27 feed commodities are reported. The lower and upper limits mark the 75% confidence range for the predicted (break-even) prices. Feeds in the “Appraisal Set” were those for which we didn’t have a price. One must remember that SESAME™ compares all commodities at one specific point in time. Thus, the results do not imply that the bargain feeds are cheap on a historical basis.

Table 2. Actual, breakeven (predicted) and 75% confidence limits of 27 feed commodities used
on Ohio dairy farms, September 25, 2017.

For convenience, Table 3 summarizes the economic classification of feeds according to their outcome in the SESAME™ analysis. Feedstuffs that have gone up in price, or in other words moved a column to the right, since the last issue are red. Conversely, feedstuffs that have moved to the left (i.e., decreased in price) are green. These shifts (i.e., feeds moving columns to the left or right) in price are only temporary changes relative to other feedstuffs within the last two months and do not reflect historical prices.

Table 3. Partitioning of feedstuffs, Ohio, September 25, 2017.

Bargains At Breakeven Overpriced
Corn,  ground, dry Alfalfa hay - 40% NDF Beet pulp
Corn silage Bakery byproducts Blood meal
Distillers dried grains Gluten meal Canola meal
Feather meal Meat meal Citrus pulp
Gluten feed Soybean meal - expeller 41% Cottonseed meal
Hominy Soybean hulls Fish meal
Solvent extracted canola meal   Whole cottonseed Molasses
48% Soybean meal Wheat bran Tallow
Wheat middlings   44% Soybean meal
    Whole, roasted soybeans

As coined by Dr. St-Pierre, I must remind the readers that these results do not mean that you can formulate a balanced diet using only feeds in the “bargains” column. Feeds in the “bargains” column offer a savings opportunity, and their usage should be maximized within the limits of a properly balanced diet. In addition, prices within a commodity type can vary considerably because of quality differences as well as non-nutritional value added by some suppliers in the form of nutritional services, blending, terms of credit, etc. Also, there are reasons that a feed might be a very good fit in your feeding program while not appearing in the “bargains” column. For example, your nutritionist might be using some molasses in your rations for reasons other than its NEL and MP contents.


For those of you who use the 5-nutrient group values (i.e., replace metabolizable protein by rumen degradable protein and digestible rumen undegradable protein), see the table below.

Table 4. Prices of dairy nutrients using the 5-nutrient solution
for Ohio dairy farms, September 25, 2017.